Press Release from the Census Bureau report on housing Permits, Starts and Completions. 

The upside; the low level of housing starts is a result of the flooded housing inventory which is currently being absorbed. Why is that good news? Well the housing market can’t recover without decreasing the inventory.

The downside; the housing market will recover slower than the overall economy, as result of a high unemployment rate and uncertain job security.

HOUSING STARTS
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 557,000. This is 4.0 percent (±9.3%)* below the revised November estimate of 580,000, but is 0.2 percent (±11.5%)* above the December 2008 rate of 556,000. 

Single-family housing starts in December were at a rate of 456,000; this is 6.9 percent (±8.5%)* below the revised November figure of 490,000. The December rate for units in buildings with five units or more was 92,000.
 
HOUSING COMPLETIONS
Privately-owned housing completions in December were at a seasonally adjusted annual rate of 768,000. This is 11.2 percent (±13.6%)* below the revised November estimate of 865,000 and is 25.3 percent (±8.6%) below the December 2008 rate of 1,028,000.

Single-family housing completions in December were at a rate of 503,000; this is 11.1 percent (±10.2%) below the revised November rate of 566,000. The December rate for units in buildings with five units or more was 245,000.

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From Corbett B. Daly at Reuters: US housing agency ups mortgage deposits for some
The U.S. Federal Housing Administration said on Tuesday it will raise the minimum down payment required to secure an FHA-backed mortgage for less creditworthy borrowers as part of a series of steps to shore up the agency’s finances.
It also said it would increase the up-front mortgage insurance premium, which is paid by the borrower when the loan is made, to 2.25 percent from 1.75 percent.
The FHA said borrowers with credit rating scores below 580 would be required to make a down payment of at least 10 percent, while the rate for higher-ranked borrowers would stay at 3.5 percent.
…..
The FHA also said it was cutting the amount of aid sellers could provide buyers to 3 percent of the purchase price from 6 percent, a move it said could help lessen incentives to inflate appraised home values.
There is a lot more details in the article! It seems the FHA is learning its lessons the hard way by tightening their standards.

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This graph from the Washington Post compares the 2000’s with other decades.

A brief rundown of why this is one the worst decades in U.S history and why we should forget this decade but not how we ended up there!

• Job Growth Nearly Zero
• Economic Output (GDP) weak
• Household Net Worth Fell As Stock Prices Stagnated
• Home Prices Crashed In The Second Half
• Consumer Debt Skyrocketed

Source:
The lost decade for the economy
NEIL IRWIN, CRISTINA RIVERO AND TODD LINDEMAN
Washington Post, January 1, 2010

http://www.washingtonpost.com/wp-dyn/content/graphic/2010/01/01/GR2010010101478.html

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Mortgage rates see record lows as fixed 30-year loans fell to 4.71% and 15-year rate standing at an average 4.27%. A direct result from the Federal Reserve’s program that allowed them to buy about $1.25 trillion in securities backed by home loans. Also contributing to the decline were Fannie Mae and Freddie Mac who purchased mortgages converted into bonds bringing down the yields that allowed lenders to reduce mortgages rates.

However, taking advantage of this historic buying opportunity (low interest rates/tax credit) is being hampered, with unemployment at 10% and the average American feeling low job security confidence. Its clearly obvious when Americans get their jobs back and unemployment rates decline that will lead the revival of the housing market. But till then the number of foreclosures will rise, and push existing home prices lower.

A bargain hunters dream! If you can afford to buy a house now…

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Last week Mortgage Bankers Association reported that the delinquency/foreclosure rate broke the record set from last quarter at 13.2% to a new record of 14.4%. That’s not that surprising given the unemployment rate at 10.2% and continued job losses mount. Jay Brinkmann, MBA’s Chief Economist acknowledged that delinquencies and foreclosures are increasing “because mortgages are paid with paychecks, not percentage point increases in GDP.” He was referring to the fact that the recession was declared ended in mid-summer when GDP grew, but that doesn’t mean people are getting their jobs back in order to make mortgage payments.

The biggest factor for the increase in foreclosures was a attributed to the prime fixed rate loans, which resulted in 33% of foreclosures in the third quarter. Foreclosure numbers will get worse before they get better, because prime fixed rate loans “represented 54% of the quarterly increase in loans 90 days or more past due but now yet in foreclosure.”

Four states combine account for 43% of all foreclosures started in the third quarter, and the winning are… Florida, California, Arizona, and Nevada. Some other interesting facts are that these state combined also had 37% of the country’s prime fixed rate loan foreclosures and 67% of the prime ARM foreclosures.

The housing market will remain in tough shape for some time, because it’s typically 6-12 months behind the economy. Even though employment is expected to stabilize and even grow next year, that growth will most likely be at a slow pace, and maybe not in regions hardest hit by foreclosures.

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